Comparative Tenancy Law and Black Markets in Europe

Comparative Tenancy Law and
Black Rental Contracts in Europe
Christoph U. Schmid, ZERP, Bremen
TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Concept of the Project
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Cooperative Project under EU FP 7
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Consortium organised into 10 teams
– University of Bremen, Germany
– University of Pisa, Italy
– Technical University Delft, the Netherlands
– University of Tartu, Estonia
– University Rovira i Virgili, Spain
– University of Lund, Sweden
– University of Silesia, Poland
– International School for Social and Business Studies Celje, Slovenia
– University of Southampton, United Kingdom
– Metropolitan Research Institute, Hungary
Consortium will cover 31 European countries
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EU 27+4 (Scotland, Switzerland, Croatia, Serbia)
Further voluntary participants: Norway, Japan, Wisconsin
TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Implementation
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TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Objectives
Objectives
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Analysing national tenancy regulation in context (questionnaire to be answered
by national reporters)
- Housing situation and housing policies (part 1)
- Tenancy Law (part 2)
2
Analysing the effects of EU law and policies on national tenancy law
3
Comparing national tenancy systems in similar groups of welfare states and at
European level
“Open method of coordination”: mutual learning and definition of best
practises
4
Determining a possible future role for the EU in tenancy law
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TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Objectives (1)
• Objective 1: Analysing national tenancy law in context
– Development and current situation of national tenancy law
– Tenancy law’s embeddedness in housing policy and housing markets
– Tenancy law and procedure “in action”
– Single fields of Tenancy law
• conclusion of tenancy contracts;
• duration and termination of contracts;
• rent fixing and rent increases;
• obligations of the parties
TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Objectives (2)
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Objective 2: Analysing the effects of EU law and policies on national tenancy law
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social policy against poverty and social exclusion
consumer law and policy
competition and state aid law
tax law
energy saving rules
private international law including international procedural law
anti-discrimination legislation
constitutional law affecting the EU and European Convention on Human Rights
harmonisation and unification of general contract law
TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Objectives (3)
• Objective 3: Comparing national tenancy systems in similar groups of
welfare states and at European (i.e. consortium) level
– compare important features of tenancy regulation, including security
of tenure, rent control, and guarantees of habitability
– compare the different roles of tenancy law in national housing policies
– compare tenancy laws as integral parts of national housing policies as
regards their connection to different welfare state systems
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basic parameter of evaluation of national regulation
– the hypothesis of a socio-economic balance, to be respected by national
regulation
TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Objectives (4)
Objective 4: What future role for the EU in tenancy law?
1. Open Method of Coordination (OMC) – best practises (e.g. common
principles of “good tenancy regulation”), mutual learning, peer review etc –
first step: evaluate failures of different national housing systems
2. Extending the social dialogue to the field of Tenancy Law
3. Minimum harmonisation under European consumer law
4. Full harmonisation under Art. 114 TFEU – not an option for residential
tenancies
A balanced European contribution to tenancy law would enhance the
legitimacy of the EU in the eyes of its citizens.
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TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Preliminary Results – General (1)
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Frequency of Failure Occurrence by Type
(indicated as total number of countries reporting failure type)
Poor-quality living conditions
Black market phenomena
Ghettoization
Tenancy-related tax evasion
Supply problems/Insufficient availability in private sector or public sector
Problems associated with housing for Roma
Affordability problems/Excessively high rents
Overcrowding
Squatting
Gentrification
Housing poverty/Homelessness
Corruption/Lack of transparency
Problems regarding restitution of property in former socialist countries
Problems related to estate agents
Occupation of social dwellings by non-qualifying tenants
Divergent intertemporal tenancy law regimes
Discrimination in housing
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TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Preliminary Results – General (2)
• Most failures are less, at best indirectly, related to private tenancy
law, e.g. overcrowding, housing poverty etc.
• Failures clearly related to private law are particularly relevant in
this project, in particular
– Excessively high rents
– Discrimination in access to housing
– Adverse economic and social phenomena directly related to
regulation (e.g. landlord prefers to leave dwelling vacant
because of strict rent regulation)
– Unjust intertemporal splittings among different tenancy laws
– Problems related to estate agents
– Black market phenomena
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TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Preliminary Results – Black Markets (1)
“black market contracts”
• Own definition: unofficial, informal contracts,
which violate legal regulations and therefore
remain in an extra-legal, unprotected sphere,
typically to the detriment of the tenant
• Generalities:
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– Black market contracts increase the private sector
dramatically in many states
– Black market contracts are generally associated with
a lack of legal protection of the tenant and low
quality of housing, as in most cases no legally
binding obligations exist for the landlord
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TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Preliminary Results – Black Markets (2)
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Types of violated norms:
(1) Violation of tax law provisions or registration
requirements by the landlord-owner, who does
not conclude a written contract as he wants to
keep the lease secret, generally with the purpose
of tax evasion
• Such violations generally irrelevant for the binding
force of the contract under private law
– Therefore no visible disadvantages in several countries such
as DE, as legal default norms apply to the contract which are
balanced and/or favourable to the tenant
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TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Preliminary Results – Black Markets (3)
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Problems:
– Difficulties of proof in other countries such as Spain: tenant
must prove the conclusion of a full lease contract, as
opposed to a short term license = risk which may dissuade a
tenant from taking legal action
• Solutions:
• Italy: a low default rent set by the law applies at the
request of the tenant in case the landlord omits the
registration (drastic sanction – but is it effective?)
– Austria: a (rebuttable) presumption applies in favour of a
tenant sitting in an apartment and paying rent without a
formal contract that a fully effective, ordinary lease contract
was concluded
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TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Preliminary Results – Black Markets (4)
(2) Violation of public law provisions on
habitability, in the case of low quality, slum-like
dwellings (i.e. the dwelling does not qualify as an
inhabitable house or apartment and could not,
therefore, be rented lawfully)
• Problem: tenant invoking any rights may lead to his
expulsion from the house by public authorities
• Solutions: difficult; proposal: public authorities must
provide social (or any other kind of) housing to
affected tenants, and landlord could be obliged to
reimburse to the authorities the costs for a certain
period;
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TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Preliminary Results – Black Markets (5)
3) Violation of prohibitions of transferability of contracts
or subletting;
• 1st Case: Austria:
• strong intertemporal splits between different rent
regimes
– old contracts with statutorily set low rents can be transferred;
among relatives even at the same conditions
– old contracts are transferred against illegal one-off payments
– obvious solutions:
» one-off payments must be restituted (already effective)
» intertemporal splits should be completely abolished, if
necessary with adequate transitional periods
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TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Preliminary Results – Black Markets (6)
2nd Case: Netherlands: social apartments with cheap
rents are illegally sublet
• Legal consequences: subletting is illegal according to
a Supreme Court decision of 2010
• Possible solution to counteract the practice: Give the
sub-tenant the right to enter into main lease contract
at same conditions after lawful termination of
contract with main tenant;
– but works only if sub-tenant herself fulfills conditions of
access to social housing; otherwise it is fair to evict the
subtenant
– counterargument: this solution may undermine the waiting list
system governing access to social housing
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TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Preliminary Results – Black Markets (7)
– 3rd case: Sweden: egalitarian and highly regulated
rental system:
• Apartments are rent controlled and allocated according to
waiting lists by a public agency; in cities, in particular in
Stockholm, such list are very long
• Position of tenant is strong: no right of termination by the
landlord, even if she needs the apartment for herself; right
to barter the apartment against another
• Abuse: apartments (with long waiting lists) are sublet or
lease contracts sold illegally at high prices; r
– report from the Swedish Property Federation from 2006 indicated
that the trade with leases is worth 1.2 billion a year in Stockholm
– social consequences: illegal transfers and subletting attenuates
housing market shortage e.g. in Stockholm but privileges welloff people who can afford high illegal payments
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TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Preliminary Results – Black Markets (8)
– 3rd case: Sweden (continued):
• Illegal subletting: insecure position of tenant; high price;
– Solution: legitimate ground of termination of master lease –
then the landlord may rent out the dwelling to a different
tenant
– Possible solution: Give the sub-tenant the right to enter into
main lease contract at same conditions after lawful termination
of contract with main tenant
(foreseen only in case of collusion between landlord and main
tenant to the detriment of sub-tenant, which is difficult to
prove)
» Possibly counterproductive as this solution may act as an
incentive to the sub-tenant to pay even more for the illegal
sub-tenancy
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TENLAW - Tenancy Law and Housing Policy
in Multi-level Europe
Preliminary Results – Black Markets (9)
– 3rd case: Sweden (continued):
• Trade with leases
– Possible solutions: criminal law sanctions:
» existing but of little effect; only repeat “black
landlords” selling leases have been fined so far
– purchase price may be claimed back (e.g. unjust
enrichment)
» of little effect as payments are done in black without receipt
and are therefore difficult to prove
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